The S&P 500 Index has slipped this week as a sharp rise in long-term Treasury yields rattles equity markets. After touching an intraday peak of 7,820 last week, the benchmark index has retreated to around 7,640, still up roughly 11% year-to-date. The move comes as bond vigilantes—investors who sell government debt to protest fiscal policy—push the 30-year yield to levels not seen in over 20 years.
Bond market turmoil
The recent surge in yields is driven by a combination of factors. The U.S. public debt has crossed the $40 trillion mark, and the federal deficit continues to widen. At the same time, economic data points to a slowdown: the economy lost over 23,000 jobs last month, the unemployment rate ticked down to 4.2% as labor force participation fell, and retail sales declined.
Geopolitical tensions add to the uncertainty. The U.S.-Iran conflict remains in a stalemate, with both sides escalating rhetoric. Treasury Secretary Scott Bessent has attempted to calm the bond market by announcing additional buybacks—a strategy where the government repurchases its own long-term debt while issuing more short-term paper. However, many analysts doubt this will stem the tide of rising yields.
Higher long-term yields could undermine the Federal Reserve's ability to support the economy. They also threaten the housing sector, as mortgage rates climb. The average 30-year fixed mortgage rate is now between 6.65% and 6.75%, a level that could further cool an already sluggish housing market.
Notable movers in the S&P 500
Despite the overall pullback, several stocks have posted strong gains this week. Moderna surged 108% over the past week after reporting a major breakthrough in skin cancer treatment, though it gave back some gains on Thursday. SanDisk jumped 20% as investors rotated back into memory-chip names. Coinbase rallied as cryptocurrency prices rebounded, and Marvell Technology rose following a significant deal with Google.
Energy stocks also performed well, with Targa and Devon Energy climbing as crude oil prices firmed. On the downside, laggards included Steel Dynamics, Coherent, CrowdStrike, Hewlett Packard Enterprise, Jabil, and Dell Technologies.
Technical outlook for the S&P 500
From a technical perspective, the S&P 500 is approaching a key support level at 7,620, which marked its highest swing on June 2. The Relative Strength Index (RSI) has turned lower and is nearing the neutral 50 level, while the MACD lines have pulled back, signaling weakening momentum.
If the index breaks below 7,620, the next support sits around 7,500. A rebound from that level could set up a retest of the all-time high. However, if bond yields continue to climb, the equity market may face further headwinds. Investors are closely watching the bond market for clues on the Fed's next moves and the broader economic trajectory.
This article is for informational purposes only and does not constitute financial advice.
